Google's Motorola Acquisition: Is Research In Motion Next?

That may be jumping the gun a bit, but one of the possible outcomes of today’s announcement that Google is buying Motorola Mobility for $12.5 billion (U.S.) could be the purchase of BlackBerry maker Research In Motion by a large international software firm, and speculation is rife about the possibility of a Microsoft-RIM partnership.

The Google-Motorola partnership fundamentally alters the global market for cell phones and cell phone operating systems. Whereas in the past only Apple offered consumers both its own operating system and its own handset, Google’s purchase of Motorola's cell phone business means that the world’s two most popular cell phone operating systems -- iOS and Android -- will both now have a particular cell phone brand identified with it.

That could mean seismic changes for the consumer telecom market. With a clear rivalry between Apple and Google/Motorola developing, analysts’ eyes are turning to the third-place maker of cell phone operating systems -- Microsoft.

The argument being put forth by some analysts has it that, if Microsoft wants its Windows Mobile operating system to survive, it may need to purchase its own maker of smartphones. And -- along with Finnish cell phone maker Nokia -- Waterloo, Ont.-based Research In Motion appears to be an ideal buyout target.

RIM has been struggling with declining market share in recent quarters, as cell phone consumers move increasingly towards the iPhone -- now the most popular cell phone in Canada -- and cell phones running Google's Android. A buyout by a large company like Microsoft could potentially rescue the company, though it would mean the loss of an indigenous Canadian high-tech company.

“The focus obviously turns to Microsoft,” writes Joe Wiesenthal at Business Insider. “Is it now forced to buy [either RIM or Nokia]? Or does Microsoft benefit because the remaining handset makers (Samsung, etc.) now turn more towards Windows?”

But while Twitter went wild Monday with speculation on a Microsoft purchase of either RIM or Nokia, some observers didn’t see such a merger in the cards.

“I still don’t think buying a handset maker makes sense for [Microsoft],” Mary Jo Foley writes at ZDNet. “Yes, owning the end-to-end pipeline works for Apple. But it’s not the way Microsoft — or Google, for that matter — has structured its mobile business. … Microsoft execs have found ways to structure its strategic partnerships so that Redmond gets what it wants from the participants without having to buy companies outright.”

The markets seemed to agree Monday that a Microsoft-RIM deal is a real possibility. RIM shares were up 2.6 per cent in mid-morning trading. Nokia shares were up 11 per cent.

But even without such a merger, Google’s purchase of Motorola Mobility will likely have a significant impact on the Canadian cell phone market and Canadian consumers.

But, unlike Apple, Google had no phone of its own. Its first attempt at entering the cell phone market, the Samsung-made Google Nexus S, was a sign the company wanted to expand into handsets. But the purchase of Motorola’s cell phone manufacturing division erased all doubts about Google’s ambitions.

In its press release Monday, Google made it clear its actions were part of an increasingly heated patent war with its cell phone market rivals.

We recently explained how companies including Microsoft and Apple are banding together in anti-competitive patent attacks on Android. The U.S. Department of Justice had to intervene in the results of one recent patent auction to “protect competition and innovation in the open source software community” and it is currently looking into the results of the Nortel auction. Our acquisition of Motorola will increase competition by strengthening Google’s patent portfolio, which will enable us to better protect Android from anti-competitive threats from Microsoft, Apple and other companies.

But some see hazards for the Android operating system in the Motorola deal. Google’s major talking point for why its Android operating system is superior largely centred around the system’s open-source nature -- anyone can make a phone that runs Android. But, some analysts argue, if Google owns its own cell phone line, it would be motivated to give its own phones a software advantage over the other phones running Android.

“By owning Motorola, Google can create Android phones to its exact specifications and take advantage of the latest advances in the operating system, just like Apple does,” Erick Schonfeld writes at TechCrunch. “There is no doubt that if the deal passes antitrust review, Motorola’s Android phones will be the first among equals.”

For consumers, the deal will mean subtle but meaningful changes at the local cell phone store.